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Report: U.S. mulls whether Berkshire Hathaway is SIFI

  • The U.S. Financial Stability Oversight Council is considering whether to designate Berkshire Hathaway (BRK.A) as a systemically important financial institution (SIFI), Bloomberg reports.
  • The holding company is the world's fourth-largest reinsurer, and had $458.1B of assets and $5.8B in derivative liabilities as of September 30. As of Friday, the firm had $31.4B in credit-default swaps linked to its debt.
  • Berkshire also owns major stakes in Wells Fargo and American Express.
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Comments (3)
  • chopchop0
    , contributor
    Comments (3458) | Send Message
     
    Too big to fail and Buffett and Obama are such pals anyways.

     

    That kind of relationship comes in handy at times.

     

    Long BRK
    23 Jan, 07:03 AM Reply Like
  • User 11008681
    , contributor
    Comment (1) | Send Message
     
    Whom the gods would destroy, they first make proud.

     

    Increased federal regulation will diminish Berkshire's prospects going forward.

     

    Long Berkshire too.
    23 Jan, 11:31 AM Reply Like
  • CStar
    , contributor
    Comments (100) | Send Message
     
    I don't think this is significant for Berkshire over time... The regulation would require Berkshire to ensure that it is property capitalized. The part of the criteria that would most quickly remove Berkshire from qualifying for being considered for this designation are the derivative liabilities. Berkshire currently has about 5.8 billion, and the threshold is 3.5 billion. As Mr. Buffett indicates, these derivatives contracts are winding down, and other than a few operational derivatives that some subsidiaries do to hedge against future prices on commodities (needed for operational planning), Berkshire's derivative liabilities will fall over time.

     

    The regulators will want to ensure that Berkshire's capital position will enable them to meet their derivative liabilities (to prevent another Lehman disaster). Berkshire commonly keeps at least 20 billion in cash or cash equivalents... even if regulators required that Berkshire keep 100% of their derivative liabilities in cash equivalents (which would be overkill), it would not materially impact Berkshire (which keeps many times more in cash now).

     

    This may move the stock price, but it should not be a significant impact on Berkshire...
    10 Mar, 03:39 PM Reply Like
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